Rome I proposal - Main contents

Towards a genuine European judicial area

The Rome I proposal is an important step on the way to completing the European judicial area in civil matters, both for businesses and for individuals. It harmonises the rules enabling the parties to an international contract - a more and more frequent phenomenon in the internal market - to tell in advance which of the various legal systems involved will apply to their relationship, thus boosting certainty in the law without the need for harmonisation of the Member States' substantive law.

The proposal follows up two earlier initiatives - the Rome II proposal, which harmonises the rules on the law applicable to non-contractual liability (for traffic accidents, in particular), and the Brussels I Regulation, which since 2002 has determined the Member State whose courts have jurisdiction in an international dispute and facilitated the mutual recognition of judgments given in the internal market.

It should be remembered that in matters governed by private law a court does not always apply its own law, particularly in cases concerning contracts, where it may well apply the law of another country, possibly the one chosen by the parties.

An important initiative of potential concern to all businesses and individuals in Europe

Subject to a few exceptions (Article 1(2)), this initiative concerns all cross-border contracts concluded by businesses and individuals in Europe. With the development of the internal market, more and more businesses and individuals enter into contracts with a party living in another Member State or a contract for goods or services located in another Member State. Examples might include a contract between a German firm and a French firm for the supply of goods, a contract between a Portuguese firm and a distributor in Italy, a contract between two Danish citizens concerning a holiday home in Portugal, a contract for a Swedish consumer to buy software from a British firm over the Internet, etc.

Consultations with the main stockholders

The Rome I proposal was preceded by extensive consultations in the Member States, the other institutions and civil society, particularly on the basis of the Green Paper of 14 January 2003, and a public hearing in Brussels on 7 January 2004 (more than 100 participants). The 80 or so responses to the Green Paper, still accessible on the website, confirmed that the Rome Convention was not only a well-known instrument but widely appreciated by relevant circles; a large majority supported converting it into a Community regulation while confirming the need to modernise some of the rules. On 4 and 5 November 1999 the Commission had already organised a public hearing on "electronic commerce: jurisdiction and applicable law", where it received 75 written contributions.

The European Economic and Social Committee and the European Parliament also support converting the Convention into a Community regulation and modernising it. A meeting with experts from the Member States on 17 February 2005 approved the broad lines of a preliminary draft regulation. All the extensive consultations that have been conducted show how seriously the Commission takes its commitments to better regulation.

Why the Rome Convention of 1980 should be converted into a Community instrument

There is already an instrument in force in the 15 "old" Member States laying down rules on the law applicable to contracts; it takes the form of an international treaty - the Rome Convention of 1980. So what is to be gained by converting this Convention into a Community instrument?

• greater consistency in the Community's legislative policy relating to private international law: since the Amsterdam Treaty came into force, Article 65 of the Treaty has been applicable to conflicts of law. The Rome Convention is the only instrument of private international law in the Community which is still in international treaty form, with all its drawbacks (possibility for Member States to depart from the common rules by means of national rules or by acceding to multilateral conventions, possibility of entering reservations, limited duration of the Convention);
• uniform interpretation of the harmonised rules by the Court of Justice: in 1980, the signatory States conferred jurisdiction on the Court of Justice to interpret the Convention, but they took 25 years to ratify the requisite protocols, the Court's judgments are still not binding on all the Member States, and the national courts are under no obligations in this regard;
• easier application of the harmonised conflict rules in the new Member States: some of them, it is true, signed a treaty of accession to the Convention in April 2005, but experience with past accessions has shown that several years tend to elapse after the treaty is signed before the Convention comes into force in a new Member State. The Rome I Regulation will be directly applicable in all the Member States.

How the Rome Convention is to be modernised

The Commission's extensive consultations revealed that the Rome Convention works quite well and is very popular in the business world. The Commission did not therefore set out to modify the general equilibrium of the instrument but to modernise it on certain points.

Reinforce the core principle of the Convention - the freedom of the parties to choose the law applicable to their contract

Among other things, the proposal sets out to reinforce the core principle of the Convention - the freedom of parties in the business world to choose the law applicable to the relationship between them (Article 3). The regulation would allow the parties to choose as the law applicable to their relationship rules not originating in the law of a State but in, for instance, certain international conventions or internationally recognised private codifications (UNIDROIT principles, Vienna Convention on the international sale of goods), thus upholding a practice that has become common since 1980. If the Community one day adopts an optional instrument on contracts (EC Contract Law project), the reworded Article 3 would also allow that instrument to be chosen.

Reinforce the foreseeability of solutions where the parties have not been able to or have not seen fit to, choose the law applicable to their relationship

Where business people have failed, or have not tried, to agree on the applicable law, it is essential for the proposal to reinforce certainty in the law by establishing simple and foreseeable rules. For certain common forms of contract (sales of goods, services, distribution, intellectual property), Article 4 clearly states which law will be applicable, whereas the Rome Convention left the courts with a wide discretion which turned out to be a source of uncertainty in the law for economic operators. The rules have been so devised as to respect the parties' legitimate expectations and the effect will be that the law of the party performing the characteristic service of the relevant type of contract will be applicable (the seller, service-provider, carrier, distributor, etc.).